Haipeng (Allan) Chen

Cultural differences in consumer impatience

In this article, the authors examine cross-cultural variations in how people discount the future. Specifically, they predict that people from Western cultures are relatively less patient and therefore discount the future to a greater degree than do people from Eastern cultures, and thus Westerners value immediate consumption relatively more. Furthermore, on the basis of regulatory focus theory, the authors predict that when Easterners are faced with the threat of a delay in receiving a product (i.e., a prevention loss), they are more impatient, whereas when Westerners are faced with the threat of not being able to enjoy a product early (i.e., a promotion loss), their impatience increases. This enhanced impatience manifests in preference for expedited consumption of a product purchased online in two studies. In both studies, the authors used a priming methodology on “bicultural” Singaporean participants; the results support the predictions. In the second study, they also found evidence in support of the process-based explanation for the interaction between culture and message framing.

When Two Plus Two Is Not Equal to Four: Errors in Processing Multiple Percentage Changes

When evaluating the net impact of a series of percentage changes, we predict that consumers may employ a “whole number” computational strategy that yields a systematic error in their calculation. We report on three studies conducted to examine this issue. In the first study we identify the computational error and demonstrate its consequences. In a second study, we identify several theoretically driven boundary conditions for the observed phenomenon. Finally we demonstrate in a real-world retail setting that, consistent with our premise, sequential percentage discounts generate more purchasers, sales, revenue, and profit than the economically equivalent single percentage discount.

Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity

We document an asymmetry in the rigidity of 9-ending prices relative to non-9-ending prices. Consumers have difficulty noticing higher prices if they are 9-ending, or noticing price-increases if the new prices are 9-ending, because 9-endings are used as a signal for low prices. Price setters respond strategically to the consumer-heuristic by setting 9-ending prices more often after price-increases than after price-decreases. 9-ending prices, therefore, remain 9-ending more often after price-increases than after price-decreases, leading to asymmetric rigidity: 9-ending prices are more rigid upward than downward. These findings hold for both transaction-prices and regular-prices, and for both inflation and no-inflation periods.

Convexity Neglect in Consumer Decision Making

Purchase decisions occasionally involve ratio calculations (e.g., calories per serving). When faced with decisions that involve information presented in such formats, consumers often ignore the convexity inherent in these calculations and rely on the more intuitive arithmetic mean rather than the correct harmonic mean in averaging ratios. In three studies, we show that convexity neglect systematically affects consumers’ judgment and leads to suboptimal choices. In addition, we provide evidence that convexity neglect is a result of individuals’ use of a wrong mental model substituting the arithmetic mean for the harmonic mean, rather than their lack of computational skills or motivation, to conduct the necessary calculations.

End of 9-Endings and Price Perceptions

We take advantage of a natural experiment to document an emergence of a new price ending that has the same effects as 9-endings. In January 2014, the Israeli parliament has passed a law prohibiting the use of non 0-ending prices. We find that one year after 9-ending prices have disappeared, 90-ending prices acquired the same status as 9-ending prices had before the law was passed. 90-ending prices became the new psychological price points. The retailers and the shoppers both reacted to the regulatory intervention optimally, which has eliminated the regulation’s intended effect.

I Paid More Than You (Before)?! The Effect of Self-Construal and Comparison Target on Unfairness Perceptions and Willingness to Pay

The present research explores how self-construal interacts with social versus temporal comparison target in shaping consumer perceptions of price unfairness and willingness to pay. Three experiments find that independent consumers perceive stronger price unfairness when paying more than other consumers do, whereas interdependent consumers perceive stronger unfairness when paying more than they themselves paid in previous transactions. These effects occur because consumers are differentially sensitive to social versus temporal comparisons in their self-appraisal as a function of their self-construal. The sensitivity to social (temporal) comparison among independent (interdependent) consumers also affects their willingness to pay. These results show that self-construal affects consumers’ respective means for maintaining their self-appraisal and alters the relevance of different comparison targets.

When More is Less: Base Value Neglect and Consumer Preferences for Changes in Price and Quantity

In a series of studies, we document an advantage in sales volume for a bonus pack relative to an economically equivalent price discount. We provide evidence that consumers’ preferences for quantity changes (including bonus packs and quantity decreases) are due to their tendency toward neglecting the base value of percentages.

All Signals are not Created Equal: Managers’ Choice of Signal Under Information Asymmetry in Competitive Markets

Purpose – Although some literature exists on how consumers may interpret firm-generated signals about the unobservable quality of their product, there has been little effort to examine whether and how managers deploy signals about unobservable quality to compete.Design/methodology/approach – In this chapter, we address this issue by examining whether managers consciously use signals to compete with other firms, and how they choose between the vast number of signals available to them. We develop a formal model that allows us to generate a set of predictions drawn from information economics and behavioral decision theory. The predictions specify a pattern of managerial behavior according to which signals belonging to some categories are relatively attractive (for economic as well as psychological reasons).Findings – We report on the results of a series of three experiments in which executives are given the opportunity to deploy signals to communicate unobservable quality to skeptical consumers in a competitive market.Value/originality – The results of the studies provide compelling evidence in support of the formal argument.